Trade Restrictions as Facilitating Practices
This paper deals with the effect of trade restrictions on competition in oligopolistic markets. Quantitative restrictions, such as VER's (Voluntary Export Restrictions) are shown to affect the extent to which foreign firms can compete in the domestic market, and hence to raise the equilibrium prices and profits of both domestic and foreign firms --when such restrictions are not too severe. This increase in prices and profits is shown to make it unlikely for VER's to raise National Welfare. In addition, I show that domestic output may fall due to the VER's. For these reasons, VER's do not seem to be desirable ways of restricting imports.Tariffs and Quotas are also shown to be non-equivalent in such oligopoly models. A comparison of the effects of tariffs and quotas shows that it would be in the interest of domesti cmanufacturers t lobby for VER's instead of import equivalent tariffs. In addition, it is shown that the foreign firm would prefer VER's to import equivalent tariffs, even if tariff revenues were refunded to them. Thus, the recent VER's on Japanese automobiles may well have been in the interests of both Japanese and American firms, and at the expense of the nation as a whole.
|Date of creation:||Jan 1985|
|Publication status:||published as Journal of International Economics, Vol. 26, pp. 251-270, (1989).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- Motoshige Itoh & Yoshiyasu Ono, 1982. "Tariffs, Quotas, and Market Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 295-305.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1546. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.